Calculating the Cash Balance

When you're done with both sections — receipts and spending — then you can calculate cash flow by subtracting spending from receipts. Cash flow is the change in the balance from one month to another. You calculate cash balance by taking the ending balance from the previous period and adding (or subtracting) cash flow. The sample cash plan shown here below does just that.

Calculating the Cash Balance

Calculating cash flow and cash balance isn't always intuitive, but understanding its two main sections is important. (Amounts shown in thousands and may be affected by rounding.)

What you end up with here is a relatively simple cash plan using the direct method to calculate the cash. The direct method means that you add the new sources of cash and subtract the uses of cash, and you have an estimated ending Cash Balance for each month.